UK Shop Prices Steady at 1.2% in June as Business Confidence Slides
BRC data shows UK retail inflation held below forecasts in June, but a Lloyds survey flags a third straight monthly drop in business confidence.
UK shop price inflation held flat at 1.2% year-on-year in June, missing the 1.3% consensus forecast and matching May's reading, as easing food costs and a wave of summer promotions kept retail price pressures in check, the British Retail Consortium reported Tuesday. The data offers a cautious signal for Bank of England policymakers scanning for evidence that consumer inflation is cooling, though analysts note the BRC basket is narrower than the official CPI measure and is unlikely to shift rate expectations on its own.
Food price inflation was the key driver of the softer print, slowing to 2.4% — its lowest level since March 2025 — from 2.7% in May. Fresh food costs rose just 2.8% annually, down sharply from 3.4% the prior month, with bumper strawberry harvests and warm-weather deals helping contain prices. Non-food inflation ticked up slightly to 0.6% from 0.5%, as summer clothing and footwear promotions provided only partial relief against broader cost pressures.
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Despite the benign inflation reading, BRC Chief Executive Helen Dickinson cautioned that retailers face a mounting cost squeeze from higher National Insurance contributions, a new packaging tax, and elevated input costs tied to extreme weather events and geopolitical disruption — warnings that the current calm in shelf prices may be temporary.
Separately, the Lloyds Bank June business confidence survey delivered a sobering counterpoint, with overall confidence dropping 3 points to +44, falling below its 12-month average of +47 and marking a third consecutive monthly decline. Economy-wide confidence fell 4 points to +31, while manufacturing confidence collapsed 10 points to +33 — the sharpest sectoral deterioration in the survey and well below its 12-month average of +46. One bright spot: hiring intentions rose for the first time in three months, and 64% of firms still expect stronger output over the coming year, suggesting businesses are managing their own operations with cautious optimism even as the broader macro outlook darkens.
The divergence between firm-level trading confidence and weaker economy-wide sentiment complicates the Bank of England's task of reading true demand conditions. Sterling may draw limited support from the softer inflation print, but sustained currency upside looks unlikely given the headwinds flagged in the Lloyds data. Continue reading at Forexlive.
